Economic dynamics with financial fragility and mean-field interaction: a model

Details Economic dynamics with financial fragility and mean-field interaction: a model Economic dynamics with financial fragility and mean-field interaction: a model

2007-09-13

arxiv.org/abs/0709.2083v1

Economy

Quantitative Finance

Statistical Finance

APFA6 proceedings

Scientific paper

10.1016/j.physa.2008.01.048

Following the statistical mechanics methodology, firstly introduced in macroeconomics by Aoki [1996,2002], we provide some insights to the well known works of Greenwald and Stiglitz [1990, 1993]. Specifically, we reach analytically a closed form solution of their models overcoming the aggregation problem. The key idea is to represent the economy as an evolving complex system, composed by heterogeneous interacting agents, that can partitioned into a space of macroscopic states. This meso level of aggregation permits to adopt mean field interaction modeling and master equation techniques.

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